Demographic Dynamics and International Trade: Stylized Facts and Theoretical Insights

Abstract

Demographic change within a country has economic repercussions for other countries through international transactions. Ongoing shifts in population size and age structure across countries have important implications for international trade, operating through changes in market size, consumption preferences, and labor supply. This review is organized into two parts and delivers three main insights. First, it documents key stylized facts on global demographic change and illustrates their implications for six major trading blocs. Second, it surveys the theoretical literature analyzing how demographic dynamics shape international trade patterns. Three central conclusions emerge. First, demographic change is likely to contribute to a shift in the global economic center of gravity from the Global North towards the Global South. Second, by influencing savings behavior and labor supply across countries, demographic developments affect relative prices and production structures. Third, demographic factors generate heterogeneous demand patterns and influence international trade through market size effects and non-homothetic preferences.